Robinhood, the commission-free retail trading platform, saw its shares nosedive by 11% despite its crypto trading volumes increasing to $14.4 billion, more than double since last year.
Volumes grew 112% year on year, while equity trading volumes spiked 65% up to $286.2 billion.
As the company reported its third-quarter earnings on Wednesday afternoon (Oct 30), the results indicated steady crypto demand despite a slump in trading volume throughout the year, dropping from $21.5B in the second quarter and $36b from the first.
Robinhood’s earnings were reported as $0.17 per share, bouncing back from last year’s loss of $0.09 per share. The company’s quarterly revenue was posted at $637 million, underneath the anticipated level of $650.67M
CFO Jason Warnick stated, “Q3 was another strong quarter, as we drove 36% year-over-year revenue growth, and dropped most of that to the bottom line.”
“We entered 2024 with the goal of delivering another year of profitable growth, so we’re excited to have already broken prior full-year records for both revenue and EPS,” he added.
This month, Robinhood introduced crypto transfers in Europe.
$HOOD Earnings:
– Total net revenues increased 36% year-over-year to $637 million.
– Net income increased year-over-year to $150 million, or diluted earnings per share (EPS) of $0.17, compared to a net loss of $85 million, or diluted EPS of -$0.09, in Q3 2023.
-… pic.twitter.com/a0yMKvgNJ6— AlphaSense (@AlphaSenseInc) October 30, 2024
However, despite the headline volume figures, Robinhood’s shares were sent down 11% after the bell on Wednesday, due to the shortfall in third-quarter earnings.
Warnick elaborated on the issue, attributing the miss to an accounting quirk tied to incentives.
The CFO said in a media call, as reported by Reuters, the difference between the Wall Street expectations and the actual earnings was due to analysts omitting “contra revenue” on the broker’s matched promotions.
Robinhood’s net revenue for the third quarter was cut by $27 million due to the 1-3% matches it pays customers as an incentive to transfer their assets onto its platform from other brokers.
“The match promotion dollars are recorded as an offset to revenue, and it looks like analysts just were not factoring that in enough for the quarter,” added Warnick.
He advised contra revenue increased $14 million sequentially, with a similar growth anticipated for the fourth quarter, before reduced gains in 2025.
Image credit: Via Midjourney
